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    Question

    A company has ₹10 lakh in equity and ₹10 lakh in 10%

    debt. EBIT is ₹4 lakh and tax rate is 30%. What is the financial leverage?
    A 1.33 Correct Answer Incorrect Answer
    B 1.5 Correct Answer Incorrect Answer
    C 1.25 Correct Answer Incorrect Answer
    D 2.0 Correct Answer Incorrect Answer

    Solution

    Financial Leverage = EBIT / EBT EBT = EBIT – Interest = ₹4,00,000 – ₹1,00,000 = ₹3,00,000 FL = ₹4,00,000 / ₹3,00,000 = 1.33 

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